Are you paying the right amount?

Fleur Lewis is a partner at Bishop Fleming Fleur Lewis is a partner at Bishop Fleming

If you employ people, you need to make sure they are being paid the minimum rates of pay and that you are properly calculating their holiday pay writes Fleur Lewis.

The National Minimum Wage (NMW) was introduced in April 1999 and the National Living Wage (NLW) in April 2016 for workers aged 25 and over. Employers who pay below these minimums face being fined by the tax office, as well as publicly named and shamed.

Since 1 April 2017, the NLW for those aged 25+ has been £7.50 per hour.

The NMW is as follows:

·       21 to 24 year olds - £7.05 per hour

·       18 to 20 year olds - £5.60 per hour

·       16 to 17 year olds - £4.05 per hour

·       Apprentice rate - £3.50 per hour

(The Apprentice rate is for apprentices under 19 or 19 and over who are in the first year of apprenticeship).

Holiday pay
A developing area of the law is holiday pay and what you need to include in its calculation.

The European Court of Justice has previously stated that holiday pay must reflect ‘normal remuneration’, which is any pay linked to the performance of contractual duties. Following this decision, the UK case of Lock v British Gas confirmed that holiday pay must also reflect commission earned, compulsory overtime and non-guaranteed overtime.

And more recently, the case of Dudley Metropolitan Borough Council v Willetts has added the following to the list of what must be included: voluntary overtime worked on a regular and consistent basis, out-of-hours standby payments and call-out payments. 

You do not need to take account of expenses, or allowances to cover subsistence, accommodation and travel costs whilst working away.

More difficult areas to consider where a view needs to be taken include: voluntary overtime not worked regularly, monthly and quarterly bonuses, company and performance bonuses and tips paid through the payroll.

These cases on holiday pay only cover the first 20 days’ holiday in each annual holiday year, so the extra eight days’ holiday entitlement under UK law is not covered, nor is any other holiday entitlement under an employment contract. 

Employees can raised retrospective claims where holiday pay has been underpaid, though such claims are limited to a maximum of the previous two years.

If you have any doubts about what you may have paid in the past, you should review your payroll to make sure it was (and still is) at least the minimum wage and that holiday pay has been properly calculated.

Employees will need to be informed where any problems are identified in order to get them on board with any changes that need to be made. 

Bishop Fleming runs its own payroll bureaux which will be happy to advise on pay issues.    

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